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There have been a couple of rays of sunshine this week in an otherwise stormy time for the ASX. While I suspect volatility will continue and anything is possible, the XAO support level of 6,600 is an important one that seems to be holding for now. The recent sideways move underpinned by that level is what could be expected after a period of extensive falls. I expect this consolidation will morph into higher prices that see strong recovery for some savaged stocks. As always the hard part is picking which ones will perform.

So, is it a good time to buy? Well, if my suggestion that prices should move up is correct you would be getting in at basement prices, but the market direction is far from certain and picking potential winners remains very much a case of pinning the tail on the donkey.

Chartists rely on patterns to predict (guess!) price direction and the big falls by the market have destroyed pretty much most of the patterns that were building. A week ago I couldn’t find one stock on the ASX 300 that was saying ‘buy me’ based on the 2 main patterns I look for in hard times (because they have proved the most reliable in the past. They are downtrend breaks and resistance breaks. Both have a specific set of criteria to meet to qualify as a ‘buy’, but those conditions are a bit complex to outline here.

Most charts still mirror the glide path of a brick, but at least some are starting to rebuild patterns and one or two have made a qualifying pattern this week. I’ve updated/added analysis for the stocks mentioned below. 

Going back a few weeks the only stock I could find that met my buying criteria was CGF. Not a stellar performer historically but coming off a low (so good likelihood of continued rises). If you look at the analysis it shows that the expected rise had a ‘flame out’ with the falls of the larger market and price fell back below the previous resistance level. It just goes to prove that pattern breaks in falling markets can suck you in. Although, as my analysis suggests, CGF may yet perform.

AD8 has broken a downtrend of almost 12 months and closed above that downtrend for more than 2 consecutive weeks - 6 weeks actually, so it is a stock I should have picked up on a couple of weeks ago. However, in this market I haven’t really been looking to hard for fresh meat.

PNV has also moved up to make several technical buy signals this week. AD8 and PNV were the only 2 stocks I could identify that currently meet my criteria for technical buys.

While EVS isn’t quite a penny dreadful, it’s no BHP either. While it also meets the criteria for a technical buy having broken and closed above a weekly downtrend, it is perhaps more a stock for the thrill seekers.

CSL has broken a downtrend and made a new uptrend but doesn’t make the cut as it has fallen below its long-term support. It could return to about $318 with luck.

NAB has an interesting chart that could entice someone wanting to add a bank to their portfolio.

TCL has also broken and closed above a downtrend but recently has made lower weekly peaks and troughs – a sign of weakness.

Next week could be a bit unpredictable with end of financial year theatrics.

Best of luck to those game enough to be actively trading this market.

Contact

Robert Norman

Phone: 0428 346 951
Email: robert@sharecharting.com.au

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